Disney, Roku Tumble in Premarket as Netflix Shock Reverberates Through the Sector
2022.04.20 16:00
By Geoffrey Smith
Investing.com — Streaming-themed stocks tumbled in premarket trading on Wednesday as the market hurriedly revised its outlook for the sector in the wake of Netflix’s disappointing quarterly update.
Walt Disney (NYSE:DIS) stock was down 4.9% and Warner Bros Discovery (NASDAQ:WBD) – the parent company of HBO – was down 4.5%, amid evidence that even the widely acknowledged sector leader is bumping up against the limits of its business model.
Netflix (NASDAQ:NFLX) stock itself was down 27.7% in premarket trading, on course for its lowest opening since 2019, after reporting a shock 200,000 drop in subscribers in the last quarter, the first decline in a decade. Even adjusted for the suspension of its business in Russia due to Russia’s invasion of Ukraine, the company only added 500,000 subscribers, well below street forecasts for a gain of over 2 million.
The real pain, however, was in Netflix’s guidance. The company said it expects to lose 2 million subscribers on a net basis in the current quarter, due to intensifying competition and a worldwide squeeze on household incomes through inflation.
Market research data published in the U.K. on Tuesday by Kantar Worldpanel had shown that Netflix and Amazon’s Prime Video (NASDAQ:AMZN) service were the least likely of all the major streaming companies to suffer from canceled subscriptions. It noted that Apple TV (NASDAQ:AAPL) and Disney+ were much likelier to experience “churn.”
Disney+ has had a sometimes uneven start to life, as the pandemic has hampered its efforts to bring new content to the service. However, Disney CEO Bob Chapek had said on the company’s last earnings call that it expects its production line to overcome those problems and allow the company to raise its prices. The company has suffered widening operating losses in growing the service, although it did manage to add 11.8 milllion subscribers to 130 millon in the three months through January.
While content providers were the most obvious casualties from Netflix’s announcement, the news also hit the makers of distribution equipment. Roku (NASDAQ:ROKU) stock, which has already fallen over 75% from its peak in July last year, fell 7.7% in premarket.
